Sometimes Managers Price Their Products Too Low,resulting in a Loss

question 52

Multiple Choice

Sometimes managers price their products too low,resulting in a loss of company profits.One reason this happens is that:

• A) managers attempt to buy market share through aggressive pricing,but the cuts are quickly met by competitors,which wipe out any gain in market share
• B) consumers tend to equate lower prices with low-quality goods,and they are never able to regain that lost market share
• C) price-skimming strategies only work in the short-term,and always eventually result in lower profits
• D) most managers simply lack good business sense,especially in regard to finances
• E) all of the above are reasons

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Definitions:

Machine Hour

A measurement of production time, quantifying the number of hours a machine is in operation during a given period.

Variable Costs

Expenses that change in proportion to the activity of a business.

Target Costing

A pricing method that involves reverse-engineering a product to meet a specific price point by targeting the total cost.

Full Cost

The complete cost of producing and delivering a product or service, including direct and indirect costs.